Tractor sales volumes are expected to grow by 10-12 per cent on a year-on-year in FY21, primarily driven by a strong rural income, said India Ratings and Research (Ind-Ra) on Friday.
According to the ratings agency, the expected rise in tractor sales would be backed by a solid rabi crop harvest and a likely good harvest of kharif, coupled with higher kharif acreage.
"Moreover, the government's initiatives in the form of a surge in minimum support price (MSP) for kharif crop and increased budgetary allocation under MGNRES are supporting rural income," Ind-Ra said.
"During April to September 2020, tractor sales volumes grew 10 per cent YoY. Ind-Ra also believes that FY22 sales volumes would also grow at a high single to low double-digit rate on account of four consecutive good crop harvests, translating into higher cash flows for farmers."
Besides, Ind-Ra expects the agriculture sector to grow better than the overall economy for the second consecutive year in FY21.
The sector is expected to grow at 3.5 per cent YoY in FY21 compared to the overall growth (gross value added; GVA) of negative 12.2 per cent," Ind-Ra said.
"As around 80 per cent of the tractors sold are used in the agriculture sector, tractor sales usually move in tandem with agricultural GVA."